Having a Realtor® sit down with you to price your home, you’ll be presented with other competitive homes that are the most similar in size, location and amenities as your home. Prices can be any higher or lower than you think it could be. Of course, you would want the highest price and say, “Let’s list it here.” But unfortunately, what if your home doesn’t sell to your expectations?
It can be risky to list with a high price, but it’s also a strategy that can work in an accelerating market. A home can settle unsold for a couple of months and end up marking the price down, lower that it should have sold for in the first place.
The science to pricing your home is choosing the right price at which your home will sell quickly. You can do that by analyzing your local market conditions and where your home fits in the range.
Having the buyer agree to your home’s value is the only way your home will sell at the highest price possible. There are three important tools to best determine a home’s market value: CMAs, Appraisals, and of course, your Realtor’s® knowledge of the market in your area.
Comparative Market Analysis (CMA)
According to Redfin.com, a comparative market analysis (CMA) is an evaluation of similar, recently sold homes (called comparables) that are near a home intended to be bought or sold. This establishes the current market value of the home and are prepared by real estate agents. It is not the same as an appraisal, which is performed by a licensed appraiser. Realtors® use CMAs to compare features that makes each home unique, including age, location, number of bedrooms, baths, room sizes, updates, condition, etc.
As a seller, you should also be able to see where your home fits in the market, if it’s in the top or lower range of similar homes. You can expect to sell for more than the other home because you’ve recently renovated than the one which has not been improved before.
Redfin.com’s definition: “An appraisal is the estimation of a home’s market value by a licensed appraiser based on comparable recent sales of homes in the neighborhood. Appraisals are ordered on behalf of a home buyer’s lender to protect the interests of the lender. The lender’s underwriter will compare the appraisal price to the final sale price of the home to ensure the value of the home is equal to or greater than the loan amount. If the home appraises lower than the final sale price, the home buyer may be able to renegotiate a lower price with the seller. If the seller won’t lower the price, the buyer’s lender may ask that the buyer put more money toward their down payment in order to make up the difference.” The professional appraiser will use variety of sources, including multiple listing system data and conforming loan formulas. Appraisals come after an offer is made when the buyer applies for a loan.
Multiple Listing Service (MLS)
Only your Realtor® has the access to the data that may not be viewed publicly through the Multiple Listing Service. According to Wikipedia, Multiple Listing Service/System is a suite that enables real estate brokers to establish contractual offers of compensation (among brokers), facilitates cooperation with other broker participants, accumulates and disseminates information to enable appraisals, and is a facility for the orderly correlation and dissemination of listing information to better serve broker’s clients, customers and the public. There’s a database/software used by real estate brokers in real estate representing sellers under a listing contract to widely share information about properties with other brokers who may represent potential buyers or wish to cooperate with a seller’s broker in finding a buyer for the property or asset. The listing data stored here is the propriety information of the broker who has obtained a listing agreement with a property’s seller. The largest MLS in the United States is currently California’s super-regional California Regional Multiple Listing Service or CRMLS which cover most of Southern California. National Association of Realtors or NAR has set policies that permit brokers to show limited MLS information on their websites under a system known as IDX or Internet Data Exchange. Using IDX search tools available on most real estate brokers’ websites, potential buyers may view properties available on the market, using search features such as location, type of property (single family, lease, vacant land, duplex), property features (number of bedrooms and bathrooms), and price ranges. In some instance, photos can be viewed. Many allow for saving search criteria and for daily email updates of newly-available properties. However, if a potential buyer finds a property, he/she will still need to contact the listing agent (or your own agent) to view the house and make an offer.
Some brokers pay data companies for specific markets that help them plan their business, such as the number of listings on hand, which zip codes are the hottest, and whether closings are trending up and down over last month or even last year.
Source: realtytimes.com, redfin.com, Wikipedia.com
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